tv Closing Bell CNBC October 3, 2012 3:00pm-4:00pm EDT
bank of america down. >> by the way, happy birthday, t.a.r.p. from all of us here at the "street signs" team. yes. >> are you going to have your cake and eat it too? >> i am. bye-bye. >> thanks for watching "street signs." see you tomorrow. hi, everybody. welcome to the "closing bell." we enter the final stretch. i'm maria bartiromo at the new york stock exchange. a close one here in the home stretch. the dow industrial is really flat, bill. hewlett packard the big story on the session today. >> we'll get to that in a little bit. i'm bill griffeth. the wild card has been hp, getting hit, weighing down the dow. the stock now at a nine-year low. the big drop coming after ceo meg whitman delivered a low profit forecast. it's now down 30% since meg took
over as ceo a year ago in september. so it's not been a very good performer, to say the least. >> been very, very tough. in fact, this, bill, is one of the leading market value losers in all technology for 2012. going to get reaction to the hp news today later on in the program. first, let's look at where we stand. the dow jones industrial average flat on the session, down about 6 3/4 points. the nasdaq in positive territory, although it, too, having given up a fair amount of gains now with a showing of 7 1/2 points on the upside. s&p 500 up just a fraction. >> so it looks like more and more like the big gains we saw after the fed's lt announcement for qe-3 are now wearing off for investors. all major averages are pretty much flat since the fed announced more stimulus measures in september. >> if that's not going to get investors buying, what will?
quint tetro is with us. also joining us is vincent of morgan stanley and jeff cox and our own rick santelli. quint, you see a top in the general market and the fed stimulus was a sell event? >> yeah, it was, marimaria. we got a ramp into what was very telegraphed quantitative easing three. we have not seen the enthusiasm continue as we had in the past. but there's some market signals that are transpiring that i'm sure you've heard throughout that are very concerning. first and foremost is the transportation index. dow theorists will say, and i'm not a dow theorist, but i respect the indicator, and that is they continue to make 52-week lows, which is a big disconnect from the overall market. we have not just rails and
transports, but we also have, you know, major technology stocks like intel, microsoft. they're really selling off into this quarter, and i think we're going to start to see some negative earnings really impact the tape. if this morning's surprise adp number can't ramp us more than two points in the s&p cash, i think we have a long three months ahead of us. >> vincent, what about that? you're the chief u.s. economist there at morgan stanley. are the fed's actions going to have much impact on the economy, and what about the jobs picture right now? >> okay, first you got to recognize the head winds the fed is working against. economic growth is slowing because of uncertainties surrounding the fiscal cliff. analysts were overoptimistic about earnings, and that reality is sinking in. and the world is a risky place. so there's reasons investors lack conviction. with regard to jobs, we've heard the adp number before. i think it's kind of getting old. so i don't take much from the fact that markets didn't respond
to the adp report. i think we'll get a solid number, 125-k. >> historically, still a very small number though, right? >> sure. it's one in which we're not making material progress in reducing unemployment, and it's not one the fed will be satisfied with. they told us they're setting a much higher bar for employment gains. >> let's talk about hp here, jeff. a sharp decline in the stock. one of the reasons that the dow industrial is really -- can't break out here in any way. you have a fair amount of winners there. hewlett packard really weighing on the market. is this an indication of more to come, or is this an hp problem? many people would say it's an hp problem given the fact that the market value loss has been so significant the entire year. but are we going to hear more from technology the way we heard from hp today? >> well, maria, i think it's systemic of a lot of things we've been seeing. it kind of just tying in with what all of our guests have been saying about the fact the fed
has not been able to basically rejuvenate the economy in a way they thought it would be able to. i'm hearing a lot of concerns about the fact that, you know, the fed thinks it can control unemployment when it can basically just control prices. when you look at some of those bell weather companies like hp and some of the others who have come out with warning announcements, fedex and the others, this is systematic. the other thing want to say about the fed is the lack of an exit strategy. fed has all this debt on its balance sheet. rates going to start going up. how is the fed going to unwind that balance sheet? i think it all comes together. you look at the fed's struggles. you look at market struggles. here we go again. another selloff into the close that has been the story since the beginning of qe-3. i think, yeah, it is all just part of the same story. >> tough to have an exit strategy when you don't know where the exit is. >> exactly. and it raises inflation because
the fed's balance sheet is going to just keep building as they hold these bonds to duration. it kindles up all of the market's worst fears. >> rick santelli, you could argue we have a flat market tonight as everybody waits for the debate. will that have an effect? >> i think it could cumulatively have an impact. i think it might be the culmination of all the debates together along with the chronological orders as we get closer and closer to the election. that hawill have a big impact wh rates and fiscal cliff issues. when it comes to the fed, all the moves were in anticipation. if you go back and look at the august meeting and how the s&p acted, the dow acted, the weakness in the dollar index, and maybe most of all the rally in mortgages, which could have been the most telegraphed easy trade for the big dogs in the fixed income fund market of all
time. but today's adp might have been better, sequentially lower. it doesn't make a different to employment. i have yet to see any research that says qe anything does. >> all right. thank you, all. good to see you. thanks for your thoughts today. appreciate it. >> thank you. >> all right. we're in the final stretch. we have a mixed market for the most part. >> i don't care what you got planned for the afternoon. stick around. we are just getting started on this very busy wednesday edition of the "closing bell." watch. coming up, downloading a dividend? what will apple do with its huge war chest and potentially devastating tax hikes? we'll drill to the core straight ahead. and you heard it here first. >> look what mark did when he was at hp. people forget how much trouble hp was in when he took over. hp without mark herd, hp with mark herd, hp without mark herd.
>> oracle's larry ellison said it here exclusively yesterday. today, hp gets hammered. another reason why "closing bell" is must-see tv. and the man with the plan. mitt romney briefly unveils his version of tax reform ahead of tonight's presidential debate. but will it work to close the gap in the polls? we'll break it all down right here on the "closing bell."
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welcome back. apple helping to push the nasdaq higher for a second straight day. we said this yesterday, but it's worth repeating. apple accounts for just under 19% of the nasdaq 100. let's get to bertha coombs. >> it really is the big apple. yesterday we saw a technical reversal and a technical levels.
apple shares fell below their 50-day moving average and zoomed back up. if you look at that chart, they are extending gains here today. also, apple changing the landscape, perhaps. reports say it's set to put out a mini ipad. take a look at these other players. metro pcs and deutsch telecom also changing landscapes when it comes to carriers. take a look at leap wireless, the one man out. those shares tumbling today. they now may not get a deal to be acquired. >> all right. thank you so much. apple is not just the biggest company in the world by market value. as i mentioned, 19% of the nasdaq 100. it's also the largest hedge fund. this is really interesting. according to a report by zero hedge, apple subsidiary is managing $107.2 billion. >> that is unbelievable. there are some analysts who
believe its primary purpose is to find legal tax loopholes. since loopholes seem to be a big target in d.c. these days, what should apple do with this huge cash pile? we're going to make some nice suggestions for them today. let's ask david pearl of epic investment partners and brian blair of wedge parterer ins. both of you point out that a majority of that cash pile is located outside the united states. so that can complicate things to some degree, right, brian? >> that's correct. it's sitting abroad right now. it's a little over $60 billion in cash. it earns very little interest. apple only pays about a 5% tax rate on that. if that were to come into the u.s., they'd pay the standard 35% u.s. tax rate. it's not doing a lot. you know, they do spend that money in the supply chain and on capital expenditures abroad. >> so with all the cash, you think they have room, david, to raise the dividend, buy back stock, tell us what you're expecting. they have been raising the d divide dividend, right? certainly more so than other
companies in technology. >> they just initiated the dividend, but they should be raising it. their payout ratio is pretty low. they can raise it up to 50% of free cash flow generation. they're going to generate over $40 billion of cash this year, so they have plenty of excess cash. their balance sheet is, as you said, $117 billion. they have a war chest if they want to do acquisitions. so basically they should look at their business and say, what do we need to grow by reinvesting or by acquiring? and whatever is left over should go back to the shareholders and particularly a dividend given their size and valuation would be the best use and would attract more shareholders. if that stock dipped for any reason, they should do a buy back. >> brian, where do you see acquisitions? at least move the radar, move the needle for this company. it's such a big company right now. >> it is. i'll tell you what, they usually make small, target the acquisitions. one of the smartest ones was back in 2008.
it's now the heart of every iphone and ipod. when you hear about the a-6 processer, that's because of that acquisition. earlier this year, they bought a small florida company for about $360 million. they do biometric fingerprint readers. >> so you see these instrumental acquisitio acquisitions. >> yes that, help them address an area they feel they're going three or five years out. i'd like to see them make acquisitions in the tv sector. i think that's where we may see them spend money in the year to come. >> interesting. for smart tv. any worries in terms of the stock price at this level? do you think we'll see a stock split? that would probably encourage a bigger retail investment buying, right? >> no worries for me, maria. as i see it right now, this is going to be another apple holiday season. this blip we've seen in the stock is a short-term move, i think. we're going see the mini ipad this month. we're going to see a massive
december quarter for iphone and ipad. i think apple is going to continue to be up and to the right. >> and hopefully no more apologies for shareholders. >> hopefully no more apologies. >> thank you, both. see you later. >> thank you. >> heading toward the close. we're about 45 minutes left in the trading day. the dow is up five points. we're flat. i think they're waiting not only for the debate tonight, but you have the fed minutes tomorrow and the jobs number on friday. it's wait and see mode for a while. >> absolutely. then the earnings parade that begins next week. the oracle ceo telling me yesterday that the spending spree has come to an end, for now at least. >> we could do a big deal again down the road. having a lot of cash in the bank is not a bad thing. >> that's for sure. >> he also made news on the company's dividend. probably no coincidence the stock is higher today. more of my rare and exclusive interview with ellison coming up. >> great stuff. first, hewlett packard shares sliding after a warning profits will decline in the next year. ellison also had choice words
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disappointing profit forecast. since taking over a little more than a year ago, that stock has lost near aa third of its value under its watch. is hp paying the price for letting former ceo mark herd go due a relationship with a contractor? here's what oracle ceo mark ellison told me yesterday. >> look what mark did it at hp. people forget how much trouble hp was in when he took over and what a spectacular job he did over that five-year period at hp. you can look at their results. it's a little bit like looking at the apple results. hp without mark herd, hp with mark herd, hp without mark herd. >> bottom line is hp under meg whitman a buy or a sell? on the technical side, richard ross. on the fundamentals side of the story, crawford del pret. thank you so much for joining us. do investors have faith in whitman's plan for the company right here? >> well, obviously what you saw
today, i mean, the answer is a resounding no, not at this moment. basically, it may be a bit of an overreaction, but they just cut the forecast dramatically from where they were, say, a month ago. it really looks like it's a combination of needing to execute on the plan they're laying out as well as a deterioration in some of the fundamentals of the business. >> so you think this is an hp problem? >> i do. i think -- >> not an industry problem, not a business problem, an hp problem. >> right now it appears that there are a number of factors at play. clearly, in some core segments of hp's business they are experiencing weakness. we're seeing some of that at intel as well. there are also fundamental issues at hp around the services business as well as around the printer business. if hp had been able to address those, they would not be seeing the decline in revenues that they're now forecasting. >> poor execution. rich, let's talk about the charts. what does the chart look like of hp? >> the chart is a disaster.
in fact, if flip the chart upside down, you get the chart of ibm, which is pushing out to an all-time high. >> good point. >> which speaks to your question about whether it's company specific or an industry issue. it's not just a one-day affair. the stock is down 40% year to date. you can see it's a loser from getting right out of the box there. well-defined trend channel. we think there's another 30 to 50% downside in this stock. let me show you a long-term chart and how i get to those levels. when we look at this monthly, this takes us back 20 years. we see that tech bubble high up around '62. now we see these twin peaks in is extremely bearish. this is a multiyear double top. this is how they draw it up in the textbooks from the downside. we broke below the base of that formation around $30. that gives us a pattern, which is $23 high. gives us measured downside to $7 on hp. i think it gets to at least $10. unless you have an extremely long time horizon, you have to dump this stock today. >> wow. okay. so is there anything that could happen with this chart that
would reverse your decision? this could go to $7 is what you're saying. >> i'm saying this is a stock that's destined for single digits. in short order, unfortunately. >> all right. we'll leave it there. i think that's the bottom line. thank you so much for joining us. don't miss the interview with meg whit man tomorrow morning at 9:00 a.m. eastern. bill, over to you. >> elsewhere, cape kelly has breaking news on dan loeb's latest activist target. what's going on? >> so details on dan's position in murphy oil, which was first mentioned last night. was it a long, was it a short, was it some sort of derivatives exposu exposure? it is long. it looks like dan may be looking to go active. they apparently own not quite 5% in murphy oil. i'm told the size of it is significant. it may be close to 5% or will be soon. they have filed for clearance to increase the size of their position if they would like to, which is the signal they may want to go active. . interesting language in the investor letter, which had -- i
understand is being distributed. we believe this lagging performance can be explained partially by murphy's disparate asset base which makes the company complex and hard to value. they have a number of suggestions, which i understand they've shared with management, as to how they can improve value. for one thing, and this is a key issue, they want murphy to spin off their retail business and separate it from there enp business. they also want to sell their canadian natural gas assets. another thing would be to sell their 5% stake in the oil sands project. so i'm told there is some dialogue, bill, between third point and murphy oil already. but who knows whether or not the two sides are going to agree on
what the plan is. it could turn into the next yahoo! situation. management ended up changing over. loeb and several of his counterparts are on the board now. >> i was just wondering why the stock hadn't moved on this news. i think it just this moment started to move on that news, kate. we'll see. it was down when you began your report. we'll keep an eye on it as we head toward the close here and see what murphy oil does. >> absolutely, bill. >> it may be unchanged. down 36 cents now at $55.59 off that low. >> that's the thing. news seems to trickle out with loeb. you don't know if he's long or short. in this case, he's definitely long and may be planning to get aggressive. >> now we know. thank, kate. see you later. >> thank you. >> heading toward the close with about 35 minutes left. the averages flat right now. mitt romney says he's considering a $17,000 deduction cap for taxpayers. one of our guests says why stop there? why not eliminate all deductions and make the tax code much
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just hours before the first presidential debate tonight, mitt romney is raising eyebrows by getting more specific than ever about his tax plans. eamon javers is in washington with details. >> i should say the the romney campaign e-mailed me this morning to point out that this proposal that romney floated out there yesterday is not a specific proposal. just kicking around some ideas. but the idea he kicked around was an interesting one. capping tax deduction at about $17,000. that is, you would have a bucket of tax deductions, and you could fill it with your mortgage deduction or other things. so who would this help, and who would it hurt? here's the hypothetical type of guy that it would hurt.
this is a hypothetical, but if you're a hot-shot young lawyer making $200,000 in new york city, you've got probably a high mortgage payment relative to your salary. you're paying high state and local taxes. if you made charitable deductions, this is a proposal that might hurt you more than it helps you. so who would benefit under this scenario that romney floated out there yesterday? well, the same hot-shot young legal associate, if he's living in the houston suburbs, renting a house paying low local taxes and not giving all that much to charity, that's the hot shot young lawyer who might really nefiis scenario, bill. with all of these ideas that are being floated around out there, the question is who wins and who loses? the losers are those people who are going to end up paying more because they lose some of those deduction. maria, back to you. >> all right, eamon. thanks so much. our next guest says don't stop
there. eliminate all the deductions. >> david callahan likes the general idea of the romney plan but is skeptical that it can become reality, mainly because, what, you feel it's going to complicate things even further in an already complex tax code, right? >> well, in general i think what romney has proposed is not a bad idea. those tax breaks generally do benefit the affluent. under his proposal, middle class families would retain the value of most of their tax breaks for home mortgage interest deduction or what have you. this idea that romney's put forth does not solve the fund t fundmental math problem he has. he wants to make up the lost revenue by closing loopholes, but he hasn't spelled out nearly enough loopholes to make up that lost revenue. his plan would probably explode the budget deficit. it's not a fiscally responsible plan. >> isn't it true, chris, that he has said he needs to work with congress in terms of going into the specifics of what those
loopholes are? >> well, that's true. ultima ultimately, congress, in particular the house ways and means committee, would ultima ultimately write any major tax reform plan. my problem here is tax reform is supposed to be about simplification. i think romney's $17,000 cap would complex complex if i the . that would add a whole bunch of new leans to the 1040, which would make the code more complex. i think we should go to something like the paul ryan house plan he introduced a couple years ago which would eliminate virtually all deductions and credits and use the money to simplify the tax structure down to 10 and 25%. romney needs to be more bold here. his running mate has the bold ideas for tax reform. that's where we should be going here. >> you know, we've had various members of the house ways and
means committee on this program in the last six months. almost to the person they say they want to initiate some sort of overall tax reform for next year that would move toward a tax simplification. we've heard this for years, but that's what's on their agenda. david, i wonder that would work counter to what mitt romney is proposing now. >> tax reform is a heavy lift. lots of vested, strong interest groups are going to fight eliminating the mortgage interest deduction, eliminating the charitable deduction. any of that will be a tough lift. go back to the basic math problem romney has. he wants to cut tax rates, which would cost about $900 billion a year, according to estimates, which means he needs to find $900 billion in tax breaks. well, all the tax expenditures every year together total $1 trillion. so basically romney would have to convince congress to eliminate all tax expenditures to make the math work in his tax
plan. that is never going to happen. it's a fantasy tax plan. it would explode our budget deficit. >> i don't think there's any math problem here. most of these deductions and the like, like the mortgage interest deduction, the state and local tax deduction, are heavily slanted towards the upper end. so you eliminate those deductions, you use the money to lower rates. and, in fact, paul ryan's 10 and 25% plan basically hit the same revenue and same distribution as the current tax code. this is totally doable. i give romney credit for moving in the right direction here, but he should be bolder, like paul ryan's house plan. >> the other issue is -- the ultimate goal here is to create economic growth, right? >> right. >> dave, if you were to see these tax cuts actually lead to economic growth, lead businesses to create jobs, do you get there the other way, through economic growth and job creation? isn't that the ultimate goal? >> yeah, but maria, look, it's tough to create economic growth.
you whack the home mortgage interest deduction and the housing sector takes a hit. whack the employer health insurance deduction, and the health sector takes a hit. >> but you're lowering taxes for corporations and individuals. doesn't it mean those people most likely and those companies most likely will be putting money back into the economy to create jobs and to create consumer spending? i was looking at the ultimate goal here. so, you know, is that where he's going with this, to eventually create growth? >> yes. the marginal tax rates are the driver of economic growth no matter -- no doubt about it. look, canada and australia do not have mortgage interest deductions. they've got homeownership rates every bit as high as we do. so we don't need a lot of these deductions and credits in the tax code. let's get rid of them. lower the rates and those lower
marginal rates drive increased investment and increased working. so that's what we need. that's the direction we need to go. >> we have the lowest taxes right now historically, and it's not leading employers to hire. >> wait, wait, wait. lowest corporate taxes or among the highest corporate taxes in america? >> i'm -- >> highest corporate taxes in america right now, right? >> highest corporate tax rate in the world right now. >> it's not that much higher than our competitors. in fact, it's lower than many competitors. stop talking about the rates. >> that's not true. >> we know it's mislead. it's effective tax burden on corporations, which is well in line with our european and asian competitors. >> isn't it true that small businesses, which of course as we all know are the real creators of jobs, will pay the ordinary income tax? if you're going to raise ordinary income tax on people making more than $200,000, that's going to hit small businesses and choke off that part of the job creation. >> that's right, maria.
the top individual tax rate have a huge amount of small business income. if romney would cut the top individual rate from 35 to 25%, for example -- >> which would help small business. >> small businesses would be benefitted by that. >> bill, that's something john thain said, the head of cit. he said one thing he's constantly hearing from small businesses is that they're getting stuck with the ordinary income tax rate. it's choking them. >> chris, i'll give you the last word quickly. >> romney's moving in the right direction. he should focus on simplification. the simplest thing to do would be on the corporate side to slash the corporate rate. we got a 35% rate. canada's at 15. this is crazy. we need to just cut those rates and grow the economy. >> gentlemen, thank you both. >> thank you. >> see you later. by the way, taxes are sure to be a big part of tonight's first presidential debate between governor romney and president obama. you can catch the entire debate right here co-hosted by maria and carl kwint knee ya.
begins at 8:00 p.m. eastern time. >> meanwhile, we're in the final stretch for the day ahead of the debate. we have the market mixed here. >> another trading snafu. nasdaq cancelling some kraft food group trades after a potential transaction error caused that stock to spike on the open this morning. just one more blow to investor confidence? and what's been done about this? >> then, facebook may soon track users and their buying habits offline. how do you like that? is this a privacy issue that will blow back on the company or a great business strategy? both sides of the debate coming up.
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this is big news. welcome back. we have a market flash right now. let's get to seema mody. >> we've been watching the big news in netflix today. the stock approaching session highs after citi research put out a positive note. after conducting a survey, it was found more customers are satisfied with the movie streaming service. 48% said they were extremely sfied or very satisfied. that's up from 44% three months ago. bill, stock up about 9%, 10%. back to you. >> yeah, almost. thank you very much. then there's the story of kraft food group.
erroneous trades caused that stock to surge nearly 30% this morning. it was during the very first minute of trade this morning, and now it's coming back again. look at that. up 1.3% now at $46.06. those early trades took it to $50. those were the trades that were canceled this morning. >> what a sharp move. these types of issues are happening more frequently. some believe it is hurting investor confidence. with us today to talk about it is carol roth and bob. good to see you all. tobias, what do you think? are you hearing this is an issue? >> no, not even a word. we had the flash crash a few years ago. that sent a reverberation. >> and the night trading snafu a couple months ago. >> not to the same extent as the flash crash, obviously. >> do you not notice this is happening more frequently? >> certainly you can't miss that. for the average retail investor,
it could be an issue. they kind of do a yikes moment and get over it. >> that's exactly the issue. the little guy feels like the game is rigged. when you have names like facebook and kraft, these are household names that they're paying attention to on a daily basis. when you see these things happen, that means there's less confidence from the retail investor. that's why we've seen a lot of money coming out of the market here. there's a by fur kags between the guys who are trading and the people investing. the little guy is looking at the investing, but he's getting caught up in the emotion. >> certainly doesn't help. >> bob, what happened? is the ser loc looking into it already? >> first of all, i thought money was coming out of the market because the global economy is lousy. the answer is there's nothing from the sec yet. they'll take a look at this. two things about this. number one, there was a clearly erroneous trade rule that was very quickly implemented. a lot of trades were canceled. 35,000 or so were canceled.
it did work there. that was certainly good news. it was canceled across all the, changes. this was not a nasdaq problem. number two, i think the big question is what exactly happened? we're still trying to figure that out. there may have been a misplace ed algorithm. that's very possible. there's not a lot of volume on these books anymore. that's a problem with the way the market is structured. >> i hate it when i misplace my al go rhythms. >> let's talk about investing overall in this market. what are you hearing from clients? are they in lock down mode? >> you'll see things like the equity income funds continue to get money from people desperate for yield. money market accounts are generating nothing. people worried about valuation, but they keep going up because there's money to chase. in the areas of general
equities, no, people are run away. they've bought bonds. i don't think it's necessarily because of a bad trade. rather, you have a combination of two massive market hits in the last 12 years. and the areas that did get excited about, things like social media where the stocks have just been crushed. >> abysmal. >> you wouldn't buy them yet though? >> no, in fact, a stock like fast bike fast facebook is one i absolutely hate. they keep trying to put these hyper growth multiples on companies that don't have hyper growth business models. fundamentally doesn't make sense to me. >> but these were precisely the kind of companies that did so well in the 1990s in the market. i guess we learned our lesson. >> we always learn our lesson, don't we, bill? >> just a little too late often. what would you buy? >> i'm still on the value consumer train. i talked about dollar tree before. 5% pop after that. family dollar came out with
great earnings. dollar tree hasn't gone anywhere. that's still a buy. >> all right. good to see you. as we head toward the close, about 15 minutes left, we are up 12 points. a rally under way suddenly. >> certainly more strengthening as we head toward the close. larry ellison telling me he doesn't see any big deals for oracle in the next few years. also making news on oracle's dif depd. more of this interview coming up. plus, kkr is one of the world's largest private equity firms, so where is it seeing investment opportunities in this uncertain environment right now? kkr's head of global mac roand asset. accolade overdrive.
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welcome back. just keeps getting worse for hewlett packard. seema mody, how bad now? >> we're continuing to watch the big moves in hewlett packard. that's the big tech lagger today. just looking at chart, bill, the stock just broke $15 a share. it's down now 50% from its 2012 intraday high it hit back in february. the stock down about 13% in today's trade. back to you. >> all right. keep an eye on that as we head
toward the close here. a big trip to oracle world. you got to talk to mark herd and larry ellison. rarely talks to anybody on camera. >> yeah, he hasn't done an interview in five years. i found him to be very open in terms of communicating. he was talking a lot about where the company is, how they're allocating capital. my takeaway, they're not going to raise their dividend any time soon. it's just not a priority. they're sitting on billions in terms of cash on the balance sheet. he said he's not going to do a big deal any time soon. so what does that leave? i would make a bet they are going to be doubling down on buy backs, maybe incremental increases in the dividend. he was pretty clear in terms of using that money or not using that money, really, for big deals. that, of course, has been the real reason and the way this company has grown over the years. listen to this. >> we're not planning any major acquisitions right now. we are really focused on the fact that over the last seven or eight years, we've re-engineered all of our applications for the cloud.
we think that's a huge opportunity for organic growth. >> looking for organic growth via the cloud. >> which they want to dominate eventually. >> right now it's a very small part of revenue, of course. >> it's going to grow rapidly. >> it was interesting. he made the point that he created this company called net suite. he owns majority of net suite. that basically was a cloud company way, way long ago. a lot of critics said, oh, you know, larry ellison doesn't care about the cloud. he always said the cloud doesn't need anything. he basically made the point he invented the cloud years ago with net suite. then we got into the dividends. microsoft has been focused on the dividend. a lot of people beating them to the punch. you tell me what you think when you hear what he says about my question on the dividend. >> larry ellison speak. >> that's the decision of the oracle board of directors. i can't make that on my own.
i believe what we're going to do is gradually increase the dividend as opposed to doubling or tripling it all at once. something like that. i think you will see gradual and regular increases in the dividend, but nothing dramatic. >> well, he answered the question right there even though he laid it off on the board. like that's going to happen, right? >> it's a low dividend relative to competitors. >> so what's he going to do with his hawaiian island? he's buying up most of malibu, california. >> i thought it was so funny. i said, why did you take out a $4.5 billion line of credit? why does a guy with $4.5 billion need a $4.5 billion line of credit? he said, just in case i want to buy the l.a. lakers or something. >> he is one eclectic guy. that's for sure. >> it was interesting to have the discussion. >> that was great. great fun. good to have you back. >> thank you. >> all right. we're coming back with the closing countdown after this. >> after the break, he's one of
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about five minutes left in the trading day. up about 12 points right now. i want to show you the trading chart for the day on the dow. a good open this morning. the adp jobs numbers brought a little encouragement, but it was sideways until the oil market started to fall apart. london crude fell below its 200-day moving average. our contract in new york below $90. once that happened, it was much lower after that. that seems to take some wind out of the market's sails. the best performer today was home depot as they talked about their expansion plans, especially into mexico. it's already been well established that hewlett packard, by far, is the worst component today. the other drag, as i mentioned, was oil. here's the contract in new york. now down 4%. after this market closed, the
trading continued lower. we're even below that $94 mark that the sector. telecom, what else? that's the best performing sector in the s&p today. that's been the case a lot lately. consumer discretionary, financials still up there. some of the safe havens like health care and utilities also on that list. bottom five today shows how weak energy was. down a percent as a group today. materials also lower. i want to show you this chart. this is from spoke investment group. since the market peaked in mid-september, they took a look at market trading in the s&p on an hour-by-hour basis. this is a typical trading chart since mid-september on a daily basis. we've had a little stutter step in the morning. then you get a small rally, sideways action, then the real selloff comes in the hour. their conclusion is that the so-called smart money, the hedge funds, private equity and so forth is where this is coming in and selling at end whereas the
so-called, pardon the expression, dumb money has been coming in in the morning. warren myers, do you buy that notion? do you see that trade flow here at the new york stock exchange. >> we do see that to a bit. i would equate that to what's happening in europe. the global impact is so great that we watch the opening here. europe is still active. we follow them. if they happen to be up, we follow them. once europe closes, the only thing we have to be concerned about is what's going to come out in europe tomorrow. you can see people are a little nervous, take money off the table. no one wants to carry that risk overnight. i do agree with it. >> we didn't get to ask you what you'd be buying these days. what is your market message? what's your theme? >> our message is large gaps, growth over value, and, yes, stay with the dividend theme for now. i think a lot of people are worried about the over valuation of some of the dividend payers. keep in mind, they do that
against the past 10 years or 20 years. last time they were above treasury yields was the 1950s. if you're telling me the last ten years, different qualitative backdr backdrop. >> telecom, i pointed out, has been pinned to the top of this sector list for a long time. do you like anything in telecom? >> we've liked telecom for a while. >> is it because of the dividend plays? >> we're seeing a little pricing power coming back to the industry. one of the amazing aspects is mobility. all of ous have our smart devices. we're seeing estimates of 27-fold increase in demand for internet wireless usage. that plays into telecom's world where they can charge a little more. >> you see that too? >> absolutely. i think it will continue for quite a while. >> all right. thank you, guys. good to see you. thank you for joining us today. going out with the dow up about 11 points right now. so coming off the lows of the day, even with